The balance of power between capital and labour is shifting back towards the former in China’s troubled manufacturing heartland as the economic slowdown wipes out jobs faster than the labour supply falls.
Many factories in the Pearl River Delta are reverting to past practice of hiring only young, preferably female, workers, a different approach from China’s post-stimulus years when even men in their 40s or 50s were in demand.
In many recruitment flyers posted on walls, electricity poles and bulletin boards in Changan, a small town in Dongguan, the maximum age requirement is 35, and another less explicit preference is for women, who are regarded as less rebellious than men.
The shifting job-hunting landscape is particularly hard for people like Huang Li.
Huang, from a village in Guangxi and approaching 35, was leaning against a pool table in a public park and drinking a can of beer during a break from job hunting. Wiping sweat from his face with the bottom of his shirt, Huang said he lost his previous job at a Dongguan lamp factory last year when the boss “ran away” – a term describing a factory owner who suddenly disappears to avoid debts and salary payments.
Although Huang finally received his wages with the help of local authorities, he became one of the migrant unemployed and was desperately searching for a new position – returning to his rural home was no longer an option for him as he can’t make a living from the small family plot of land.
“I’m deeply worried,” Huang said, adding that it was easier for women to find general, or non-skilled, jobs. He described a jobs vacant post he had seen from a watch manufacturer saying it needed dozens of general workers, but only women aged 18 and 35 would be accepted.
“I want to work in an electronics factory,” Huang said. “I don’t have much education, all I can do is manual labour.”
For now, Huang pays 300 yuan (HK$350) a month in rent to share a room with another worker, and is desperately in need of cash to cover his monthly expenses of about 2,000 yuan, including food and phone bills.
“If I can’t find a proper job, then I will do whatever I can find, like hourly paid work,” Huang said. “If I don’t work, I won’t have money for food.”
The frustrations felt by Huang and many other migrant jobseekers who lack the necessary skills to ride China’s hi-tech wave and are excluded from China’s social security coverage, is the result of the persistent economic slowdown and the redistribution of global production.
While China is moving up the value chain and the government is keen to replace sweatshops with hi-tech firms, Beijing also faces serious economic and social challenges in creating jobs for its 270 million migrant workers – whose average age in 2015 was 38.6 years while only one in four had made it to high school.
“There is a price to pay for China’s economic restructuring – if you want the services sector to rise, you have to accept that the manufacturing sector will drop,” said Lu Zhengwei, chief economist of the Industrial Bank. “But services haven’t been strong enough to take over completely. We should be alert that there is a problematic hollowing of manufacturing, or recession.”
These stresses have emerged as China’s labour supply is peaking. China’s overall labour pool, defined as those aged between 16 and 59, has been shrinking for the past four years. Meanwhile, a growing number of migrant workers are employed in the services sector as manufacturing jobs retreat.
The average wage of migrant workers is still rising, reaching 3,072 yuan a month in 2015, but the growth in wages has slowed.
Beijing has targeted three main groups – migrant workers, an estimated 1.8 million workers expected to be laid off from China’s coal and steel sector, and an estimated 7 million college graduates every year – to ensure job market stability.
The situation is still manageable on a nationwide basis as governmental job indicators are still within safe zones, but the rising pressure will be acute in the industrial rust belts and traditional low-cost manufacturing hubs like Changan, which once had more than 30 industrial zones crowded with small factories.
These industrial towns are now dotted with empty factories and closed shops. The local government said 243 factories closed or moved out of Dongguan in 2015 while labour unrest in Guangdong province was at a three-year high at the end of 2015.
Across the street from where Huang used to work, a small metal workshop had cut more than half of its staff to 12 people in two years, blaming the rising cost of raw materials, wages and higher product quality requirements.
Cai Xuewen, a trader of secondhand machinery, said the exodus of foreign investment – which plummeted 87 per cent last year in Changan – had led him to buy more used machines from closed factories than he could sell. He hasn’t sold any in two months.
“A manufacturer friend of mine once joked that if you want a man to experience hell, then make him run a factory,” Cai said. “Of course it’s a joke, but I think it’s pretty close to reality.”
Cai, a former migrant worker who built up his small machinery repair shop, now spends most of his time sipping black tea in his workshop full of secondhand machines and tools in the Shatou Industrial Zone.
In Jinxia Yifang Industrial zone, home to more than 20 small factories, Liu Sheng, 50, ran two firms – one making moulds and the other dolls, and he said his workforce had shrank to about 60 from a peak of 200 workers.
Liu said his customers couldn’t pay him in full or on time, which disrupted his cash flow, so he couldn’t afford to hire more workers.
“Some migrant workers have recently come to my factory to look for jobs. I can’t take them on simply because I can’t afford to,” Liu said. “I’d rather give extra orders to other factories and pay for their few days of work than recruit another migrant worker.”
China’s economic policymakers are seeing the problem: “The cost of hiring a worker in China is enough to hire 1.5 workers in Thailand, 2.5 in the Philippines and 3.5 in Indonesia,” the National Development and Reform Commission, the top economic planning body, said in a statement last month. “China’s labour cost advantages have already been taken over by Southeast Asian nations. … China’s manufacturers face huge challenges.”
Many large China-based manufacturers are relocating to lower cost nations. For example, China’s overseas mergers and acquisitions in manufacturing reached US$7 billion in the second quarter, or about 10 times more than the same period last year, according to a report published by the Chinese Academy of Social Sciences. Big-name manufacturers such as Taiwan’s Foxconn are eying other places.
But people can’t move as easily as businesses. In Dongguan, migrant workers from inland Chinese provinces still must rely on overtime work just to make ends meet. Most factories offer a basic salary of 1,510 yuan per month for entry-level positions, the minimum wage in Dongguan, for a five-day week and eight-hour shifts. In reality, such workers must work dozens of hours extra to earn 3,000 yuan per month – the real average income.
Inside an agency at the Huian labour market, a number of jobseekers sat on black sofas, with their bags on the floor. They were about to start unskilled jobs, which meant no social security attached, at an hourly rate of 13.5 yuan per hour, at a small plant recommended by Tang Chen, the labour agent. Tang explained to them that he would take an 8 per cent commission from their wages.
Tang said a growing number of factories were opting for hourly based employment to save social security costs.
China’s compulsory social security fund contribution, levied on the employer, is about 40 per cent of salaries, a level that even Beijing is trying to lower.
The outflow of people and businesses is affecting many on the ground.
In Jinxia No 2 Industrial Zone, a dozen pool tables that once attracted crowds of workers are now covered in dust and fallen leaves. Only two or three factory workers play a round of pool at one of them during their one-hour evening break, the usual rush hour for businesses around the zone.
Li Yabi, the owner of a nearby grocery store that targets migrant workers, said a year ago she could earn about 100 yuan a day renting pool tables to workers for five yuan per hour. But now she gets about 20 yuan per day.
“It’s particularly difficult to find jobs this year,” Li said. “No job means that you don’t have money to spend. Five yuan per hour [for playing pool] is very cheap, but it’s a big expense if your pocket is empty.”